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HRM in a Changing World: Balancing Effectiveness and Equity in People Management Practices

John Simmons Liverpool John Moores University, UK

Abstract
The paper proposes a stakeholder systems model of corporate governance to address issues of contribution and commitment with particular focus on human resource management (HRM) contexts. Its theme is that effective governance can be aligned with social responsibility, and incorporating stakeholder views in decision-making processes enhances performance and commitment in contemporary organisations. A stakeholder analysis of performance management systems in UK academic institutions is used as a case study. This illustrates the value of the approach as a mode of organisational enquiry, and as a method of arbitrating between stakeholder claims. The paper advocates a stakeholder systems model of HRM as a means of developing robust and ethical systems. The model delineates design, operation and evaluation stages of HR systems, links these to distributive and procedural dimensions of organisational justice, and suggests how quantitative and qualitative measures can be combined to assess system effectiveness.

Introduction
A particular form of personnel management constitutes the dominant approach to managing people in developed economies at the beginning of the 21st century. Its proponents claim that in title and philosophy human resource management (HRM) is fundamentally different from the old style personnel management that preceded it. Initially in the USA, then later in the UK HRM became so widely adopted as to be described as the new orthodoxy [45]. To many, the advent of HRM marked the coming of age of human resources (HR) as a management discipline- distancing it from inauspicious beginnings as a welfare activity and long periods as a low level, second order function acting at the behest of more established management specialisms [32]. To achieve this HR practitioners had to give greater importance to operating in a way that would gain them acceptance as business partners by management colleagues [39] than to their alternative role of employee champions. However this instrumental focus on utilising people for maximum commercial advantage was regarded as an acceptable price to pay in the battle for recognition and status. Personnel practitioners could at last take their place at the top management table, and it was HRM philosophy and practices that made this possible. However, in any battle there are casualties, and in this campaign it was employees, trade unions, communities and the environment that bore the brunt of these. Downsizing, de-recognition, and plant closure were the price many had to pay in HRs drive for competitiveness and profitability [14] and issues of ethical conduct and employee voice were often sidelined when HRM was debated [17]. The paper questions the relevance of the dominant form of HRM- termed mainstream HRM- to contemporary organisations, and advocates an alternative form of employee governance. The concept of mainstream HRM [23]- defined later in the paper- is used as an idealtype for discussion purposes but the author acknowledges many different forms of HRM exist in practice.

Effectiveness and Equity in People Management Practices


The paper argues that, in spite of mainstream HRMs undoubted impact, its approach to managing people does not represent personnel management in its final or optimum form. Rather HRMs individualist and overly managerial stance is regarded as a necessary stage in the professions drive to achieve influence in the business climate of the 1980s and 1990s. However, the paper contends mainstream HRM ignores the reality of 21st

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century organisations, and is therefore a less appropriate mode of employee governance for today's business environment. It suggests an alternative view of HR systems as the negotiated outcome of salient stakeholder groups facilitates more democratic forms of representation and accountability. Organisations need to identify, consult and manage a number of internal and external stakeholders to operate successfully in the new business context, and thereby combine effective corporate governance with social responsibility [27]. The paper emphasises the importance of viewing employees as a significant stakeholder group, and demonstrates that incorporating employee views in the design of HR systems can enhance performance and commitment. This is especially important in organisations reliant on the contribution of professionals who have significant autonomy and discretion in their work roles, and are potentially mobile if they feel the psychological contract with their employing organisation has been violated [49]. In its first section the paper identifies mainstream HRMs central tenets together with hard and soft modes of implementing these. The appropriateness of this form of HRM to contemporary organisations is then assessed from ethical, methodological and effectiveness standpoints- prior to offering an alternative stakeholder systems model of corporate and employee governance. A performance management case study is used to illustrate the benefits of the stakeholder systems approach to both researchers and practitioners. For researchers, the study confirms stakeholder analysis as a robust and ethical method of organisational analysis. For practitioners, it provides a way of identifying and arbitrating between stakeholder claims that incorporates effectiveness and organisational justice considerations. The paper then demonstrates how a stakeholder systems model- incorporating design, operation and evaluation stages- can facilitate effective and ethical HRM. The model also offers a vision of how stakeholder-accountable organisations might operate in the new millennium. Finally, the paper identifies issues for a continuing HR research agenda that include: factors influencing stakeholder saliency, issues of stakeholder representation and accountability, and methods of promulgating stakeholder-accountable business and HR practice.

Mainstream HRM- Core Beliefs


Mainstream HRM is concerned with the effective deployment and management of people to achieve organisational goals and competitive advantage [9]. Its central tenets are: HR policy and practice should derive from and contribute to corporate strategy; employees and employers have common interests; line managers have a significant role in the implementation of HR policies at the operational level; and HR should make a demonstrable contribution to organisational effectiveness and profitability [2]. Variants of mainstream HRM differ somewhat in their view of people as human resources and how they should be managed. One versionhard HRM- makes little distinction between people and other resources utilised by the organisation. All are regarded in the same calculative manner- to be leveraged to achieve maximum added value, then discarded or replaced when requirements change [64]. In contrast, soft HRM aspires to a longer term, more developmental view in its belief that investing in people results in greater contribution and commitment from what may be the organisation's only long-term source of competitive advantage [56]. While the merits of hard and soft variants are debated [58], HRMs central beliefs are common to both and seen as axiomatic if HRs role in strategic decision-making is to be maintained. However, in spite of the impact and current standing of mainstream HRM, trenchant criticisms of it continue. Those in the ethical HRM school view it as prescriptive and universal in its stance, unitarist and individual in its philosophy, and positivist and managerial in the research approaches that underpin it [24]. Even soft HRM variants are derided as the iron fist in the velvet glove that lure, then exploit gullible employees [5]. Mainstream HRM is regarded by many as a morally questionable form of management [31 & 62]. Its view of people as means to an end rather than having intrinsic value results in short-term concern for profitability and effectiveness overriding the development of longer-term sustainable relationships within a wider constituency of organisation stakeholders. In developing this theme the paper delineates three distinct but interrelated criticisms of mainstream HRM prior to demonstrating how an alternative stakeholder systems approach to the design, operation and evaluation of HR systems addresses these.

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The papers central proposition is that stakeholder systems approaches enable effective governance to be combined with social responsibility in a way that avoids twin extremes of employee exploitation and utopian ethical stances. In this it acknowledges that, while employing those on the basis of their contribution to organisation effectiveness is fundamental in market economies, both justice and effectiveness rationales are served by providing employees- and another salient stakeholder groups- with a voice in HR decision-making [47]. This recognises people are employed as means to an end- organisation effectiveness- but not solely for this instrumental purpose. Organisations owe employees- and another stakeholder groups- a general duty of care and a voice in decisions that affect them. Mainstream HRMs inability to provide this is demonstrated by considering its relevance to the contemporary business environment; then by examining three criticisms of it that have particular significance in this context.

Stakeholder-Accountable Organisations in the Twenty-first Century


Organisations of the 21st century must take account of a new business environment [66]. As stakeholderaccountable organisations they require the consent of internal and external groups and greater environmental sensitivity than their 20th century counterparts for effective operation. Negotiated interactions are replacing hierarchical relations among key stakeholders in organisations that have increasingly permeable boundaries [55] Market pressures on them remain- but alongside them organisations should acknowledge the legitimate demands of a range of interest groups. Strong et al [59] categorise such groups on the basis of the markets in which they are located: shareholder stakeholders in capital markets, customer stakeholders in product or service markets, and employee stakeholders in labour markets. There are powerful ethical arguments for adding diffuse and nonhuman stakeholders such as the community and the environment to this list. The paper addresses the central organisation issue of how to reconcile the attainment of company objectives with stakeholder demands for influence and organisational justice. Within this, it gives particular emphasis to the development of HR systems that facilitate employee voice as the contribution and commitment of knowledge-based workers is an increasingly important issue in HR [3]. The rationale for a stakeholder systems approach to managing people is confirmed by assessing mainstream HRM from methodological, effectiveness and ethical standpoints as hitherto the role of stakeholder theory in this debate has been largely ignored [25].

Mainstream HRM- the Methodological Critique


The paper suggests there are significant limitations in the research studies on which mainstream HRM is based. Conclusions drawn from these large-scale correlational studies claim to demonstrate relationships between particular HR practices and levels of organisation effectiveness or profitability [40]. The implication is that bundles of HRM practices identified as having this positive impact should be introduced in other organisations [28]. However, mainstream HRMs positivist research basis means this kind of proof can be criticised on both epistemological and practical grounds. First, findings of positivist studies are based on meta-analyses of the value of particular HRM initiatives carried out at a distance from the phenomenon studied with the implication that this relationship will hold good in other organisation contexts. Leaving aside the contingency critique that particular HR practices have relevance for particular organisations at particular times, there is the more fundamental issue of the way in which this research philosophy disenfranchises key stakeholder groups. It is questionable whether employees will be committed to HR interventions and practices on which they have not been consulted [48]. The paper argues that the philosophy and methods of stakeholder analysis are more sensitive to organisation circumstances and culture, and its interpretivist mode of inquiry involves empowers and empowers interest groups so their views are given serious consideration [51]. When used ethically in an action research context, it seeks consensus between these without recourse to coercion, hidden agendas, manipulating information etc. It is therefore more far reaching than issues management and strategic management in going beyond scanning the environment in order to facilitate stakeholder participation [10]. It aligns with the

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burgeoning interest in corporate social responsibility- relevantly defined as understanding and acting upon stakeholder and wider interests in order to deliver obligations to society [46]-, ethical conduct, and corporate governance. However its potential contribution to developing ethical HR practice has so far been overlooked [69].

Mainstream HRM- the Effectiveness Critique


Ethical critiques of mainstream HRM will have limited impact unless those involved convince practitioners there are practical methods of identifying and resolving ethical issues that do not prejudice organisation objectives. Currently many in HR see ethics as a zero sum game. They believe the greater the time, expense etc devoted to ethical practice; the greater the drain on an organisation's effectiveness and profitability [20]. There is also the fear that, if they advocate such a policy, HR will be viewed as a soft touch, unbusinesslike or regressing into a welfare role [68]. However, there is growing support for what has been termed the reconciliation thesis [22]demonstrating the value of ethical business and HRM practice by such measures as financial performance [53], customer perception [70], or the attractiveness of the organisation to prospective employees [60]. Studies confirm the provision of employee voice opportunities benefit an organisations psychological contract with its employees, and enhance contribution and commitment [34 & 15]. This underlines the message that ethical HRM can also be sound business practice- and that transparency of purpose and organisational justice in the management of people should be key components in an organisations HR or social responsibility audit [37]. Good strategies areanticipatory rather than reactive and intimately concerned with the cultivation of long term employment relationships [6].

Mainstream HRM- the Ethical Critique


Given the well-documented negative impact of mainstream HRM philosophy and practice on employment relationships and psychological contracts during the final two decades of the last century [26 & 12], it is surprising that its ethical basis has not been the subject of more critical assessment. Nevertheless some interest has been shown in the relationship between ethics and HRM, and it has to become the focus of serious academic inquiry. However, progressing from this to develop a philosophy of employee governance is challenging in a field of contested concepts, disparate theoretical approaches and unsettling questions [63], and therefore the relationship between justice and HRM is identified as an important area for research [11]. What is lacking in the debate is an ethical philosophy of HRM and an organisation development technique for implementing this. Taking these in turn, a philosophical rationale for the ethical use of stakeholder theory is found in Niebuhrs concept of the responsible self[13]. This suggests individuals act responsibly if they consider existing stakeholder relationships and consequences of envisaged actions for them. A development of the theory is to propose the concept of the responsible organisation. One that recognises its relationships with a range of internal and external stakeholder groups, and establishes systems to facilitate fair discourse with and between them on strategy initiatives the organisation considers undertaking. While such discourse includes salient stakeholders- those that can facilitate or impede organisation actions- there are powerful arguments that employee stakeholder groups should have particular significance within this. Debates on HR policy have particular significance for employees as the emergent HR systems have the greatest impact on them. The argument for incorporating views of knowledge based employees when designing organisation systems has already been referred to. However, normative ethics and organisational justice extend this and specify a broad deontological duty of care even in respect of silent stakeholders- those affected by organisation decisions but who have little impact on them such as local communities or the environment- as it is morally right to do so [22]. Mainstream HRM appears to have little regard for these moral obligations. Ethical critiques of mainstream HRM relate it to the concept of organisational justice, and this is examined in the following section.

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HR Systems and Organisational Justice


Organisational justice subsumes members view of equity in the distribution of organisation resources distributive justice- and perceived fairness of organisational decision making processes- procedural justice [1]. Perceptions of the latter affect a range of outcome variables with positive links to commitment and job satisfaction [35] and a negative association with turnover [42]. The neglect of organisational justice by researchers and practitioners is seen as a serious weakness in reshaping HR performance management processes [57]. Similar comments have been made in respect of other HR specialisms such as selection, [29] appraisal [18] and payment systems [61]. Employees perceiving a higher level of procedural justice in organisational decision making are likely to demonstrate greater acceptance of organisational goals and values, and be more willing to exert effort to achieve these. Organisations can therefore increase the perceived procedural justice of HR systems by facilitating greater employee involvement in system design and modification. Concern to establish HR systems acceptable to those governed by them and equitable in their operation aligns with a view of organisational justice as a two-dimensional construct incorporating system procedural justice and system distributive justice [16 & 54]. This suggests employees associate knowledge of HR systems and their perceived validity and equity in operation with 'system procedural justice'; while equity of HR outcomes such as salary progression, access to training etc relate to system distributive justice. These organisation justice concepts are incorporated in the stakeholder systems model of HRM described later in the paper. This paper suggests stakeholder group views- including employees principally affected by HR systems in operation- are seldom canvassed when systems are designed or modified.

Towards More Socially Responsible HR Practice- A Performance Management Case Study


This study in question utilised stakeholder analysis to assess performance management systems in UK academic institutions in the context of wider HRM practice in these universities and colleges [49]. Organisational systems were viewed as the negotiated outcome of a number of interested parties or stakeholders. It addressed issues such as: who are the key stakeholders; what are their influences on and expectations of performance management systems; how do these expectations align with system aims and operation; and what insights can be gained from these regarding the development of stakeholder-accountable HR systems in knowledge based organisations? The study is distinctive as its conclusions are based on the perspectives of key stakeholders or expert witnesses' from fieldwork carried out between November 1999 and April 2000. One expert witness group constituted the teaching staff of two UK Business Schools, together with those in line or HR management roles in these institutions. The other comprised academic staff from universities and colleges across the UK whose research interests, professional expertise and teaching responsibilities are in performance appraisal. Measures of performance used to appraise academic staff were identified from appraisal documentation and a review of the literature. Respondents were asked to evaluate these measures in terms of usage and acceptability within their organisations performance appraisal system, and relate this to the systems overall motivational impact. A view of HR systems as negotiated outcomes raises the issue of how to achieve stakeholder consensus on system philosophy and process. Incorporating stakeholder perspectives is crucial where the viability of the developed system is dependent on its acceptability to stakeholder groups- or where decision quality or acceptability likely to be enhanced by consideration of different stakeholder viewpoints [4]. One method of developing effective and ethical HR systems is stakeholder synthesis [68]. This robust and ethical approach was used in the British School of Osteopathy (BSO) to revitalise and develop that organisations performance management system. The process involves: identifying key stakeholder groups; identifying strategic objectives and the extent of consensus and conflict between them; then viewing competing interests collectively and openly in relation to available resources and rival claims to produce a viable system.

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Organisational characteristics of BSO have striking similarities to those in universities and colleges. Both have powerful stakeholder groups with different objectives operating within a public service ethos. Both aspire to be learning organisations and suppliers of high quality professional services. Staff within each are archetypal professionals- potentially mobile and not easily controlled by non-specialist managers or administrators. Moreover, both wish to devise and operate effective HR systems that their stakeholder groups will buy into. The studys conclusions confirm stakeholder analysis as a robust and insightful method of organisational enquiry that can reconcile disparate stakeholder perspectives on HR systems in an effective and equitable way, and provides principles for a stakeholder systems model of HRM.

A Stakeholder Systems Model of HRM


The model (Fig. 1 below) incorporates ethical and effectiveness considerations within a stakeholder systems model of HRM. The case study described relates to performance management, but the principles apply to other HR systems or to an organisations overall approach to HRM. The model delineates design, operation and evaluation system stages and their organisational justice dimensions within a stakeholder-accountable model of HRM. It assumes a range of stakeholder perspectives and agendas in relation to HRM philosophy and process within an organisation that recognises obligations to a number of salient stakeholder groups. Senior managers assess the significance of stakeholder perspectives to the organisation by assessing the legitimacy, leverage and urgency of particular stakeholder claims in relation to organisation objectives [38]. Their decisions mean certain stakeholder perspectives are acknowledged as requiring reconciliation with those of other salient stakeholder groups. In the model stakeholder groups include line managers, employees, labour representatives, appraisers, appraisees and HR specialists from within the organisation; external fiduciary stakeholders e.g. customers and stockholders who influence from a distance via managers recognition of their importance- and silent stakeholders (e.g. communities and the environment) - who are principally influenced by system outcomes. Stakeholder synthesis processes to reconcile competing stakeholder perspectives and agendas range from management discussion and decision through to more structured and participatory processes such as SWOT analyses, Delphi technique, or soft systems methodology [52]. The extent to which the process produces agreement between stakeholders on HR philosophy and its operation are measures of system procedural justice. The perceived fairness of HR system outcomes such as access to training, promotion, salary progression etc are measures of system distributive justice. The overall operation of a HR system is evaluated by a range of qualitative and quantitative measures. These include organisation and wider stakeholder satisfaction with the system as well as assessment its process operation, resource utilisation, organisational contribution and overall equity- that comprise an overall evaluation of HRM in the organisation context.

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Senior management decisions on stakeholder saliency Line managers Employees HR Specialists Labour Representatives Fiduciary Stakeholders: Shareholders customers Silent Stakeholders: the community, the environment

Stakeholder perspectives and agendas

Stakeholder synthesis- agreement on HR policy Perceived fairness of / agreement on aims and objectives of HR policy System procedural justice

HR practice Perceived fairness of HR systems: fair hearing, access to information, opportunity to challenge etc System procedural justice

HR system outcomes Perceived fairness of HR decisions on access to training, placement, promotion, salary progression etc. Impact on motivation and performance System distributive justice

HR evaluation measures Organisation and wider stakeholder satisfaction? Efficacy- do HR systems work? Efficiency- do HR systems operate cost effectively? Effectiveness- do HR systems contribute to organisation goals? Equity do HR systems embody fairness and integrity? System evaluation

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Fig 1: ORGANISATIONAL JUSTICE CONSIDERATIONS WITHIN A STAKEHOLDER SYSTEMS MODEL OF HRM

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Conclusion
Key themes of the paper are summarised below. The paper advocates stakeholder analysis as a means of recognising competing stakeholder claims within a more democratic, accountable and ethical HR philosophy; and emphasises the significance of employee views within this. Research evidence suggests employee influence on HR systems enhances levels of acceptance, commitment [65], job satisfaction [43], and organisational justice [36] The case study cited aligns with this in confirming employee views of organisational justice are influenced by the acceptability of HR systems and decision criteria as well as by their outcomes. More formalised stakeholder involvement is facilitated by its incorporation within a stakeholder systems model of HRM. These conclusions are significant within a continuing HR research agenda that includes factors influencing stakeholder saliency [30], issues of stakeholder representation and accountability, and methods of promulgating stakeholder-accountable business and HR practice; as well as to practitioners seeking to evaluate and develop existing HR systems. Organisations increasing dependence on the commitment of those who work for them places HR philosophy and practice at the heart of corporate strategy. This is especially important in knowledge based organisations where employees represent the only sustainable source of competitive advantage [8 & 44] Acceptance of the stakeholder-accountable view of organisations by those involved in corporate governance, and the significance of employee views within this, gives those in HR the opportunity to lead strategy debates at the heart of the business [33]; to develop sustainable 'high performance HR practices' [41]; and to stimulate due consideration of ethical issues in each of these [71]. A new philosophy of HR and related OD strategy coalesce within the stakeholder-accountable HR system offered. This model incorporates the why and the how of stakeholder involvement when developing effective and ethical HR systems, and provides a framework for organisation analysis and action research. The stakeholder systems model makes a significant contribution where the viability of the developed system is dependant on its acceptability to a number of potentially conflicting stakeholder groups, or where decision quality is likely to be enhanced by consideration of different stakeholder viewpoints. However, models and techniques for socially responsible HR practice are insufficient in themselves. The more significant question is how to persuade organisations operating in market economies to incorporate a greater ethical dimension in their decision making? Purists who believe weight of moral argument will alter priorities of institutional investors are utopian, while those who seek ethical emphasis through greater regulatory control are unlikely to attract government support [7]. Instead, a coherent, positive, practitioner-focused message that corresponds with the zeitgeist of the time is suggested as the best way to influence management discourse and practice. Financial malpractice in organisations and people management concerns regarding employee voice and commitment provide compelling evidence of the need for ethical standards, integrity and transparency at all levels of corporate governance. Stakeholder perspectives can have a similar impact on management thinking in this decade in the way that excellence debates struck a chord with quality management concerns in the 1980s because of the alignment between contemporary business issues and political discourse. Stakeholder based approaches offer both a philosophy and a method of putting this into practice. The study also demonstrates the integrity and value of stakeholder analysis as a middle ground mode of organisation enquiry. While it leans toward a subjective and interactionist view of organisations, it offers the possibility of incorporating quantitative methods and analysis alongside this. Its scope to combine different research philosophies and methods in a pragmatic but robust way will appeal to those who put dialogue and accommodation between different research paradigms before purity of approach [9]. In summary, the paper identifies methodological, effectiveness and ethical critiques of mainstream HRM as an appropriate way of managing people for organisations of the twenty-first century and suggests an alternative philosophy and practice. It addresses the methodological critique by advocating alternative organisation development processes that respect the characteristics of an organisation and its stakeholder constituencies, the effectiveness critique by proposing that organisation systems are shaped by those who will be subject to them, and the ethical critique by offering a stakeholder-accountable philosophy and system of organisation governance. Conclusions from the paper therefore support the normative or organisational justice

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case for incorporation of views of key stakeholder groups in HR system design and modification. Progression from the stakeholder analysis stage into a subsequent stakeholder synthesis process accords with an instrumental or managerial use of the theory to achieve organisationally desirable outcomes. It reaffirms the research and managerial benefits of viewing organisations as dynamic coalitions of interest groups, the utility of the stakeholder concept for identifying rival stakeholder claims and arbitrating between them, and the benefit of such stakeholder analysis interventions at corporate governance and HR system level. The effectiveness and organisational justice outcomes of such an approach may enable it to be regarded as a best practice model.

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